Facebook shares spiked on Wednesday with stellar earnings results, but plummeted back down on word teenagers may be falling out of love with the social network.
The world’s leading online social network reported profit of $425 million in the quarter that ended on September 30, compared with a loss a year earlier, AFP reports.
The earnings figures showed soaring advertising revenue, nearly half of it from smartphones or tablet computers.
Facebook shares leapt about 15 percent and remained aloft until chief financial officer David Ebersman mentioned in an earnings call that internal analytics indicate decreased use of the social network by “younger teens.”
Shares dropped back near the trading day closing price of $49.01 after the earnings call.
“That would probably do it,” independent Silicon Valley analyst Rob Enderle said of share price suffering due to fears it is losing the devotion of teenagers.
“That market is incredibly fickle,” he continued. “You don’t want to see a trend that kids no longer think Facebook is no longer the place to be; that it is now their dads’ service.”
The notion that Facebook is falling out of favour with a budding generation prompts worry about the company’s future earnings potential no matter what fiscal guidance executives provide.
“The kids are Facebook’s seed corn, and you don’t want to lose that,” Enderle said.
Ebersman cautioned that Facebook engagement by young people is tricky to measure because users claims regarding ages are not validated. The social network used internal tools to get a sense of activity by teenagers.
“Our best analytics shows use by US teens overall stable, but a decrease in use by younger teens,” Ebersman said.
The third quarter results for the California-based firm were well ahead of most forecasts, with revenues rising sharply to $2.016 billion, prompting a leap in shares in after-hours trade.
“For nearly 10 years, Facebook has been on a mission to connect the world,” said co-founder and chief executive Mark Zuckerberg.
“The strong results we achieved this quarter show that we’re prepared for the next phase of our company, as we work to bring the next five billion people online and into the knowledge economy.”
The number of people who use the social network daily in the quarter was 728 million in a 25 percent increase from the same quarter a year earlier, according to Facebook.
About 1.19 billion people used Facebook monthly in a rise of 18 percent from the same period in 2012, the company reported.
Meanwhile, the ranks of Facebook members connecting to the social network with mobile devices at least once a month soared 45 percent to 874 million people.
On average, more half a billion people daily accessed Facebook using smartphones or tablets, according to the earnings report.
- BusinessDay
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